The Nebraska Legislature adjourned on April 18, after passing 24 bills on their final day, including a new policy to allow tax increment financing (TIF) for developing workforce housing in rural areas. The legislation aims to provide a new tool to expand housing options in Nebraska communities where employment opportunities outpace housing options. The bill was supported by Nebraska Housing Developers Association (NHDA), an NLIHC state partner.

Legislative Bill 496 (LB496) modifies Nebraska’s existing TIF guidelines to expand eligibility to smaller rural communities. LB496 also provides a definition of “workforce housing” that does not account for the rent levels or sale prices of the new homes or for the incomes of the households who will be occupying them. Rather, LB496’s definition of workforce housing is based on the cost of development. Under the new law, workforce housing is defined as owner-occupied homes that cost less than $275,000 to construct or rental units that cost less than $200,000 per unit to construct. For rehabilitation, TIF can be used for workforce housing if the costs exceed 50% of a unit’s assessed value. Additional definitions of workforce housing in LB496 include upper-story housing or types of housing attractive to new residents considering relocation to a rural community.

Concerns expressed by leaders of larger cities like Omaha and Lincoln were addressed in LB496 in a last-minute amendment that added the remediation of extreme blight as an eligible use of TIF. The threshold for extremely blighted areas is that the average rate of unemployment is at least 200% of the state average and that the poverty in a given area exceeds 20% for the total federal census tract.

Nebraska continues to work to expand opportunities in rural areas. The new TIF policy builds on the work of the legislature in 2017 when it established a new Rural Workforce Housing Investment Fund (see Memo, 6/5/2017). The lack of affordable housing is considered a primary barrier to reversing the declining population trends in the state’s rural communities.

LB496 establishes new criteria for what types of redevelopment projects can be considered eligible for TIF. Any municipality approving a redevelopment project now has to conduct a housing needs study that is current within 24 months of approval of the project. Municipalities are also required to hold public hearings on the incentive plans created for redevelopment projects. After the public hearing, municipalities must demonstrate that the incentive plan is necessary to prevent the spread of blight or promote additional safe and suitable housing. LB496 also requires that any redevelopment project verify it will not result in the unjust enrichment of any individual or company.

Legislators opposed to LB496 fought until the last possible moment, even taking the unusual measure of staging a filibuster on the final day of the legislative session. Senator Steve Erdman (R) led the filibuster effort, expressing concerns that municipalities’ uses of TIF have been poorly documented and loosely regulated. Other opponents argued that the use of TIF for expanded housing purposes would divert funding desperately needed for public safety or education. In the end, LB496 passed the legislature by a vote of 35 ayes to 8 nays.

The new law now heads to Governor Pete Ricketts (R) for his signature. Advocates are confident Mr. Ricketts will sign the bill.

“We are happy to have another financing tool available as we work to address our state’s mounting housing challenges,” said Matthew Cavanaugh, NHDA’s executive director. “It remains to be seen how much new housing we can create through TIF, but NHDA will be working with the developers in our network to make sure we maximize this opportunity for the benefit of low income residents across Nebraska.”

For more information about LB496 and efforts to expand rural workforce housing in Nebraska, contact Matthew Cavanaugh at: matthew@housingdevelopers.org